Bank Indonesia Tightens Intervention to Stabilise Rupiah
Reuters
Bank Indonesia has said it is ready to conduct large-scale foreign exchange interventions to stabilise the rupiah amid increased external pressure and high volatility in global markets, Reuters reports. The currency has fallen to record levels and remains one of the weakest performers in Asia this year.
Rupiah Hits Record Low
The rupiah fell to a new record low of 17,445 per US dollar on May 5, 2026. At some points during trading, the rate briefly strengthened above 17,400 per dollar. Since the start of the year, the currency has weakened by around 4% against the US dollar and remains among the weakest currencies in Asia. On May 7, the rupiah gained 0.3%.
Bank Indonesia Governor Perry Warjiyo said the regulator has sufficient foreign exchange reserves to carry out large-scale market interventions. These will be conducted not only in the domestic market but also in offshore markets, on a 24-hour basis, in order to smooth volatility.
In addition, the central bank plans to tighten domestic foreign exchange rules. The threshold requiring documentation for dollar purchases will be reduced to $25,000 per person per month. The measure is aimed at limiting speculative demand for foreign currency and supporting the rupiah.
Reasons for Rupiah Weakness
Warjiyo said the depreciation of the rupiah is linked to rising tensions in the Middle East, high US Federal Reserve interest rates, and capital outflows from emerging markets. Additional pressure in April and May came from corporate foreign-currency debt repayments, which increased demand for US dollars.
He also noted that the rupiah was already under pressure before the escalation of tensions in the Middle East at the end of February. Investors had expressed concerns over Indonesia’s fiscal position, the independence of the central bank, and transparency in capital markets.
Indonesia’s GDP Growth
Earlier, economists reported that Indonesia’s GDP grew by 5.61% in the first quarter of 2026 compared with the same period in 2025, exceeding market expectations of around 5.3%. The main driver of growth was domestic consumption, which accounts for more than half of the economy, alongside government stimulus measures.
The International Monetary Fund has assessed Indonesia’s economy as broadly stable and forecasts growth of around 5% in 2026. At the same time, external conditions remain a constraint, as weaker demand for commodities and volatility in global trade may limit export growth in sectors such as coal, metals, and palm oil.
The OECD and other international organisations have also warned that tighter trade restrictions or a slowdown in the global economy could reduce growth momentum, despite strong domestic demand.
Conclusion
Analysts at International Investment note that Indonesia’s currency market reflects a combination of external pressure and structural financial vulnerabilities. Policy measures are extending beyond short-term stabilisation of the exchange rate. The overall macroeconomic picture remains mixed: while the economy is growing faster than expected and supported by domestic demand and government spending, external conditions continue to exert structural pressure. Higher US interest rates, geopolitical instability, and commodity market fluctuations are driving capital outflows from emerging economies.
Corporate foreign-exchange transactions remain an additional risk factor, increasing short-term demand for the US dollar and adding to rupiah volatility during external shocks. As a result, macroeconomic resilience coexists with currency instability, while policy efforts focus on smoothing short-term fluctuations without changing long-term dependence on external capital and commodity cycles.